Dr Reddy’s outlook robust, upgrades ratings to overweight: JPMorgan

JPMorgan has upgraded the ratings of Dr Reddy’s Laboratories to ‘Overweight’ from ‘Neutral’, on the back of robust outlook for US economy and growth in domestic revenues.

Our upgrade is predicated on domestic market share recovery, which management expects to sustain and a strong outlook for the pharmaceutical services and active ingredients (PSAI) portfolio driven by robust patent expiry calendar.

Visibility for US growth in the near term remains robust driven by a strong product slate. Domestic revenue growth in fourth quarter gathered steam after lagging the market for the past four quarters, aided by enhanced field-force productivity and gains in prescription share.

Dr Reddy’s management expects domestic growth to be ahead of the market going forward. The foreign brokerage has picked inability to sustain domestic growth, potential regulatory issues, delay in product launches in the US and adverse foreign exchange fluctuations as key risks to the company.